By listing a company......

By listing a company, despite raising fund for further expansion for the company, most importantly is to enrich the major shareholder by sell out some of their share.

2nd, by listing a company, major shareholder can establish as much private owned companies as possible which can trade within the amount set by regulation with the listed company. Those companies sure profit with guarantee sales to the listed company. Those are categorized as recurrent related party transaction.

3rd, listed company can act as final resort to buy out whatever investment or asset major shareholder would like to sell. Which mean major shareholder can feel safer to invest. If anything happen like cannot find buyer or investment turn sour, listed company will come and help.

As a minor shareholder, we are always at a disadvantage position. What we can hope for is a good corporate government and strict law and implementation by overseeing authority.

Stock performance sequence by sector

Few months ago the sequence was
1. Oil and gas, 2. Real estate 3. Oil palm 3. Consumer product.

Now the sequence change to
1. Consumer product, 2. Oil palm, 3. Oil and gas. 4. Real estate.

What will be next?

The stock performance is always interchangeable. Those sector which got behind will eventually get under value and those sector which is hot now will get over value. So, somebody will notice it sometimes and the game sequence change. Of course at that time, other reason will be given, not under or over value. But please do not get me mistaken, the reason given is true and reflect the reality, it is just how the world works to balance up when things getting unbalance.

Seller has some secret

We should never 100 percent trust the seller. Because most seller has incentive to sell you something tangible, intangible, service or idea. They are always bias to promote good thing. Not a single seller would tell you about competitor product's product is better even if it is true. If they are honest and don't want to lie, they will choose to avoid talking about the bad thing. In the end, customer will only get information about the good thing about the product.

We should not rush to make decision even if we are so attracted to the talking of the seller or broker. Research, verify, ask around who has experience, competitor, to get wider perspective, before making our owned decision.

P/S: seller can be anyone, like advertiser, direct seller, broker, investment agent, banker, business owner, property owner, politician, friends, unknown crowd etc.

Diversification of business by a listed company

If a listed company announced they want to diversify into a new business, in the name of risk management, recurring income, improve profit, etc, is it good or bad?

I think unless the new business venture can create synergy to current business, else is not a good thing. From an investor point of view, if the management has no experience and not familiar in the new venture, and the diversify action by management is just to improve profitability of the company without synergy created between those business, investor will be better off by diversifying themselves and choose the best company in each businesses to invest into.

Those company who diversify without synergy thought acts like a speculator, crowd mentality, dives into other type of business whenever the business prospect looks good, like the company is owned by them. They don't realize that most of the investor invest into the company because the company has excellent track record in the current business, not because the company management have "farsighted ability predicting the future of economy". Imagine a property developer suddenly venture into oil and gas, or a electronic manufacturing firm venture into oil palm. It is just ridiculous.

If for example the oil palm company venturing into property development because they have lots of land, or oil service company venture into upstream exploration to have full control of supply chain, or a drink company venture into snack company to create a better brand, or a bank venture into insurance business, then synergy can be created, and value can be added to the company.

Hibiscus Petroleum

Recently, hibiscus petroleum's associate company Lime acquire 2 new concessionaire of petroleum exploration right in Norway and middle east. For your information, Hibiscus Petroleum is the first SPAC or special purpose acquisition company in Malaysia, startup IPO with no business, but using the fund raised from IPO to acquire a business within a certain period. So, 35% share of Lime is acquire recently. The transaction still pending shareholder approval. Due to Lime has several exploration right in middle east, Hibiscus Petroleum share rose to about RM1.60 from RM0.80. After this recent acquisition by Lime, Hibiscus Petroleum share price rose to RM2.10.

I would like to say here that I think Hibiscus Petroleum is a very risky investment. Because,

1st, exploration itself is a very risky business and require huge amount of investment. It might take 5 years or more from exploration stage to production stage before petroleum can be sucked up from the well. In between, no result or cash will come in, hence no dividend, more over, more cash may need to contribute into.

2nd, 35% is a minority stake, it may not have the power to control the financial or management of the Lime. It might be a passive investment and when Hibiscus Petroleum need cash or working capital, it can be only from bank, and from shareholder (potential more right issue in the future). What if the controlling shareholder do not want to pay out dividend?

Considering that, it is still speculating counter to me.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. I may already have positions in the above mentioned counter. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Consumer sector in high growth market

For a high growth and populous area, consumer sector is a good place to be when talk about investment. Growth prospect is bright. It is also very defensive if the consumer product is price in an affordable range of wide consumer.

Sometimes I feel that a product that price a little bit expensive in the sense of average wages of the area, the product growth potential is tremendous. It means the product is still pioneer and mostly never been tried before. With a little promotion or advertisement to boast the curiosity of the people, the will save or borrow to buy it. Just like when we are young, we see a shoe, or computer game, or toy that we madly want but cannot afford, we will save for months to buy it. Also because of high growth, they will afford it very soon. That's why McDonald, Starbuck, car sale can grow so fast in China.

When people has some money, they want to live a better life. And once they tasted the sweetness of better life, they will want more. The desire process never stop.

Be cold or no emotion, when talk about money. Only Logic...

We need to take full authority in our money. That's mean

We need to keep track of our money tightly
We need to have full authority to move our money whenever we want.
We need to know what happen all the time or have access to know what happen all the time.
We need to have alternative way to track or verify our money.
We need to have right to hire an independent parties to protect our interest.

Whenever talk about money, we need to be cold, be cautious, be very logic.
Emotional will enable others to take advantage on us.
Friendship, sympathy, relationship, etc is common tactics used by con man.
Cold is 1st barrier i know to protect ourselves, follow by knowledge and logic in subsequent barrier.